Detailed Narrative
Q2 & H1 FY26 Financial Performance Overview
Divgi Torq reported its highest ever quarterly total income of INR88.3 crores in Q2 FY26, representing a 49% year-on-year growth and 15% sequential growth. For H1 FY26, total income stood at INR165.1 crores, a 39% increase from H1 FY25. EBITDA for H1 FY26 was INR41 crores, up 35% YoY, with a healthy margin of 24.9%. PAT for H1 FY26 reached INR19.7 crores, growing 43% YoY, resulting in a PAT margin of 11.9%. Gross margins remained strong at 63% in H1 FY26, expanding by 119 basis points.
Strategic Win: Japanese OEM Nomination
The company secured a significant nomination from a leading Japanese OEM, a global market leader, to develop a transfer case for their iconic pickup truck platform. This win is highly strategic due to the OEM's global presence and the platform's scale, with over 1 million units. Divgi Torq's proprietary technology, which reduced the transfer case weight from 45kg to 32kg while preserving electronic circuitry, was a key differentiator. Initial application will be in India, but the platform's global nature opens doors for future international expansion.
Segmental Performance: Transfer Cases, EV Transmissions, and Components
The transfer case segment delivered strong growth of 42% year-on-year in H1 FY26, driven by sustained volume offtake from anchor customers like Mahindra, Tata, and Force Motors. The components segment showed robust performance, growing 113% YoY in H1 FY26, primarily export-led. Exports contributed nearly 16% to total income in H1 and over 20% in Q2 FY26. In contrast, the EV transmission segment declined by 5% in H1 FY26 due to subdued market volumes, though a 20-25% improvement is expected in H2 FY26 with the new Sigma platform for Tata.
Export Strategy and Working Capital
Divgi Torq's export business is gaining momentum, with current revenue streams mainly from the United States and Mexico, and a new program for Audi in Portugal ramping up for production in calendar '26. The company is also in talks with customers in Korea, Thailand, and China. The increase in working capital is attributed to DDP (destination duty paid) export contracts, which necessitate maintaining higher inventory levels to manage long sea routes and market volatility🌐. Management views this as a necessary cost for higher export margins.
Next-Gen Transmissions and Technology Focus
The company is focusing on 8-speed dual-clutch automatic transmissions for the passenger segment in India, skipping 6/7-speed options. Drive trials are underway with OEMs to demonstrate superior performance and fuel economy. For commercial trucks, Divgi Torq is investigating rear-wheel drive automatic transmissions. A significant RFQ for a five-speed manual transmission from a major Indian CV OEM is also under evaluation. The company emphasizes its engineering depth and ability to provide integrated high-value solutions globally.
Capital Allocation and Growth Outlook
Divgi Torq's preferred approach for growth is organic, with a focus on aggressively acquiring technology rather than large-scale M&A, citing the challenges of integrating cultures and maintaining quality. The company is evaluating establishing a manufacturing footprint in the U.S. market, with a conclusion expected by March end '26. Management anticipates a 20-30% volume improvement from broadening its portfolio with Tata Motors and a potential 30-40% uptick in some export contracts from August '26.